Is It Time To Review Your SMSF Succession Plan?

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Is It Time To Review Your SMSF Succession Plan?


While SMSFs often comprise a significant portion of an individual’s overall assets, many people do not have sufficient succession plans in place when it comes to their SMSF.  Earlier this year, the ATO expressed concern at the amount of SMSF trustees who had overlooked situations such as incapacity, particularly due to the increasing prevalence of dementia and other age-related conditions.


It is important to establish adequate plans regarding who your superannuation balances will be paid out to upon your passing.  The use of Binding Death Benefit Nominations and Reversionary Pensions can make the administration of the fund after passing a much easier process.  However, there are other important aspects that should be addressed as part of your overall succession plan.



There are two types of trustee of a Self Managed Superannuation Fund (“SMSF”):

  • Individual trustees  - the members of the fund act as trustee in their personal capacity
  • Corporate trustees - the members are appointed Directors of a company that acts as trustee of the fund.


Although legislation imposes restrictions as to who is able to be a trustee (or director) of the fund whilst the member has mental capacity, you should make plans for circumstances where mental capacity is lost. For example, it is possible for a trustee or director of a trustee to appoint an alternate to themselves under an enduring power of attorney to act solely in relation to the SMSF in the event mental capacity is lost.


Depending on the complexity of your SMSF and the type of investments held, the fund may need to be continued to be administered for a long period of time after your passing. Under the superannuation legislation, the trustee of your estate has the capacity to be appointed as a trustee or director on your behalf to ensure the continued operation of the fund. 


Choosing the right person to act in this capacity may be difficult, especially where blended families or complex financial arrangement are in place and accordingly, you need to be comfortable that your attorney will act in accordance with your wishes.  Any strategies should be considered as part of your broader planning considerations and made in light of potentially complex relationships between directors or trustees going forward.


If you have any questions in regarding to forming or updating your succession plans, please contact your relevant ESV Engagement Partner on 9283 1666.

Article by Geoff Tierney